Beginner Questions about Risk Free, Risk Premium and Beta

I have been learning DCF model and hope someone can help answer a few questions below. Thanks a lot in advance!

  1. (Risk free rate) I found some posts stated DCF model is based on the nominal term so we use nominal interest rate. If that is the case, do we always use 10 year Treasury yield + inflation rate for the Rf (assuming this is a US business)?

  2. (Equity Risk Premium) I have been watching Damodaran's Valuation videos. He mentioned he always uses the forward looking equity risk premium instead of historical looking. To do that, he uses the S&P index current level and adjusted Dividend and Buy Back for each of the coming year based on the estimates. Then, he can find the expected return on stocks and subtract the risk free rate to the equity risk premium.
    My questions: 1. Where do I find the base year dividend and stock buy back total amount? From Bloomberg, Capital IQ or somewhere else?
    2. How do I find the estimate growth for stock dividend and stock buy back for the coming years?
    3. If a company's main business is in Asia but trades in the U.S, we need to use that country's equity risk premium and other numbers to value, right?

  3. (Beta) Most of time when we do a DCF, should we always use the bottom up beta instead of the regression beta because it has lower standard error?

Thanks again!

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Mar 31, 2019 - 10:56pm

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